Digitization has already taken place in every segment of the industry. The world is practicing to shift to a paperless environment gradually. But when we glance over fintech organizations, they are still relying on old-school traditional methods. Fintech companies operate as a centralized model, but there is an absence of more transparent solutions to secure the process. To add a layer of transparency and more security, Blockchain Technology is the Solution. Blockchain is not only limited to cryptocurrencies. It can completely give another dimension to the fintech industries. This tech-based revolution can bring unparalleled transition in the financial sector. Blockchain will soon be going to become an integral component in fintech industries due to its robustness. In fact, by 2023, 15.9 billion worldwide spendings are expected on blockchain solutions.
Continue reading further to know where the potential lies.
What is Blockchain Technology:
It is essential to understand the basic concept of Blockchain first. Blockchain is a data recording mechanism that makes it hard or nearly impossible to alter, exploit, or manipulate the system. A blockchain is a decentralized transaction database replicated and distributed on the Blockchain through a vast computing system network. Each block of chain lists transactions, and the history of transfer is attached to the ledger of every member every time a new transaction happens on the Blockchain. The decentralized database handled by different people is known as Distributed Ledger Technology (DLT).
Challenges Blockchain will Address in the Fintech Industries.
For a better and secure user experience, consider how Blockchain will help fintech industries create a seamless and safe digital environment.
Payment Transactions Without Boundaries:
As blockchain technology is internet-based, a transfer can be done from someone to anyone in the world. These transactions will be secure enough as blockchain works on a peer-to-peer connection in which public key and private key can be accessed by the involved users only. It is an excellent solution in the fintech industry to perform domestic and international transactions securely and smoothly.
Also, there will be no third party involvement in your transaction process, which ultimately reduces transaction time and commission fees usually charged for international transactions.
Digital identity verification:
Today's conventional structures of identification are inconsistent, unstable, and exclusive. By offering a centralized, interoperable, and tamper-proof platform with critical advantages for companies, customers, and IoT management systems, Blockchain allows more stable management and storing of digital identities. Blockchain will make it easy for users to handle personal identity records, log in to digital services, securely exchange data with each other, and validate claims and transactions. With one-time authentication, they will perform transactions all around the earth.
But still, it does not imply that they are entirely private: allowed blockchains will enable any user to register and access the system once their identity and position are recognized. It is incredibly beneficial because multiple people, such as the organization's staff, the leaderboard, the customer, and insurers, are involved.
Providing data, documents, transfers, and asset security:
With Blockchain, you cannot only transfer payments to someone, but records, digital rights, documents, and other information can also be transferred. Fintech firms can exercise this Blockchain solution as thousands of transactions are performed there daily.
To make each transaction protected in Blockchain, each block contains a hash linking with the chain's previous block in the decentralized ledger. It makes any modification impossible, which is the primary gain of blockchain technology. You cannot alter, temper, or delete the data once it is uploaded to the database.
Trade and Finance:
Financing continues to rely on papers exchanged internationally for details validation, i.e., records are still written or faxed. Share and stock transactions also need to go through complicated trading, transfer, clearing, and payment process. For settlement, this usually takes 2-3 working days but may be expanded over the weeks. Each dealer needs to retain their records for all transaction-based documentation and search this database periodically for greater consistency against each other.
In this regard, the introduction of blockchain technologies into financial markets can provide traders with an exemption from onerous counterparty checks and simplify the entire lifecycle. And this eliminates the possible risks, speeds up the method of settlement, and increases trade precision.
Blockchain-based Scoring System:
To ensure maximum accuracy of data, a Blockchain-based credit scoring system can be used by financial institutions. It will also reduce the cost to some extent. It isn't straightforward to get credit in countries like the United States without a high score and a long history of credit. To also address issues like loss of record or information due to delay in updating the system, Blockchain will help.
Fast and Efficient Operations:
Blockchain functions on a distributed ledger. All data is saved in the form of blocks that any person who is part of a chain can access. It will now help to quickly bind parties in financial exchange, which will lead to higher and faster operations. Consider the following scenario.
If an entity uses a different bank's cash withdraw machine, the system is expected to call the user's bank to confirm that the individual has adequate funds in his account. With all of the information already stored in one location (which is the blockchain ledger), the individual will move with the withdrawal process without waiting for this permission. Blockchain does not rely on slower clearance procedures that generally run through multiple processes before accepting transactions, unlike conventional financial institutions.
Effect of Implementing Blockchain in the Fintech Industry:
With the required effectiveness and security, Blockchain will mold the conventional process into a seamless digital process. Below are the few effects mentioned which will enhance the fintech industry.
In the middle of economic crises, planning to take decisive steps for financial management will help businesses decide on resources by getting a full perspective, boosting business, and conquering the rivalry.
It is essential to take decisions proactively while implementing the Blockchain to achieve performance and security. Optimized algorithms, robust computer systems, energy resources, and an expert team to make the overall system smooth and minimize the risk factor are requirements for a successful blockchain system.
Alignment of the organization:
Turn the company into an environment of incremental exchange of information, solve the impacts of information hiding, introduce high-end technologies, educate staff, and match Blockchain with corporate operations.
Let consumers believe that by creating a strong team, Blockchain is easy and accessible. It is easy to develop successful customer relationships and create a positive culture when a team develops partnerships and undergo training. Earning a globally recognized blockchain certificate will help companies embrace Blockchain and discover innovative ways to handle information, enhance infrastructure and system control, and analyze blockchain adoption.
Privacy and Security:
Via specialized access system, biometric verification, and robust encryption algorithm, Blockchain assures a high level of privacy and security. It also enables organizations to arrange training sessions for their employees to help them grasp advanced tools and technologies.
What Future Behold:
E-wallets and completely virtual transactions carry a substantial room and momentum as we transition into a more digitized environment where digital payments are carried every second. Blockchain is still relatively young. Companies are exploring what they can do about the technology, especially in approved (non-public) blockchains where it is possible to eliminate inefficiencies and potential inconsistencies associated with agreed approaches. A self-verifying network unlocks a world of new economic activities that can control small and multi-level transactions.
It is just the beginning. Apps for blockchains have yet to appear in the market. There are people and companies like Cubix that are going to change the finance sector orientation. Cubix Chain, a blockchain-powered technology, is awaited to fuse your business with this emerging technology.
So, your wait ends here; contact us now for revolution.